A Qualified Domestic Relations Order (QDRO), pronounced “Quadros” is ordered by the court to initiate proceedings for dividing benefits under a retirement plan.
The divorce court enters a QDRO to assign retirement plan benefits to a spouse or an ex-spouse. The recipient of the benefit is known as the alternate payee. The QDRO elaborates on the benefits that will go to the alternate payee, timing of payment of benefits, nature of benefits – one time payments or annuities, and status of payments upon the demise of the alternate payee or the participant.
When the QDRO is drafted, points that need to be considered include the extent of retirement savings that should be regarded as marital property, tax implications for parties concerned, and compliance with state and federal laws.
The tax consequences, especially for the owner of the 401K and similar retirement plans, can be quite severe. A distribution of funds without a QDRO can leave the participant with more than his or her fair share of the tax liability, and these may include penalties for taking out the retirement fund before maturity. Your spouse may try to convince you to divide the 401K funds without a QDRO. It is not in your interests. You need a good lawyer to take you through the process and implications involved.
Pension sharing issues that come up in divorce cases can get very complicated without a QDRO. It addresses important issues such as pre-retirement and post-retirement benefits, survivor benefits, and much more. Without it, a canny lawyer can draft a division that would be grossly unfair to you.
Alex R. Hernandez Jr. provides services as attorneys for the alternate payee or the participant. In both scenarios, our endeavor is to ensure that the QDRO represents the interests of our clients. If the plan administrator requests any changes to the QDRO, we go through it and see that it is totally in compliance with the plan.
If you would like the help of our talented lawyers, contact one of our offices today!